Thursday, 19 May 2016

Will Japanese or US Governments end up paying for Moorside nuclear plant?

According to spokespersons for the proposed 'NuGen' nuclear development at Moorside in Cumbria either or both the Japanese and American Governments could end up part-paying for the proposed 3.8 GW project. That is if it ever happens (which I doubt).

According to a report in World Nuclear News, NuGen's boss Tom Samson said that they were hoping to get the US and Japanese Government's support to supply export credit guarantees for the debt element of the necessary investments - as well as the British Treasury. What this means is that if there are serious cost overruns on the project that exceed the equity (risk capital) element of the project then the Governments would end up paying out. Given the track record of the only western-based nuclear plant using the AP1000 technology from Toshiba that is earmarked for the project then this scenario is all too plausible. The only two projects in the West are at Virgil C Summer in South Carolina and Vogtle in Georgia. Both are suffering serious cost overruns and will not be built on time. It is just a question of how high the cost overruns will be. Of course these plant are being built with what amounts to a blank cheque. The developers are monopoly electricity suppliers with compliant regulators who allow the electricity companies to charge the electricity consumer (in advance) for whatever the power plant costs.

In Georgia, one serious estimate is already suggesting that Vogtle will cost 50 per cent more than the original estimate. And this figure could well rise! If the debt element is two-thirds of the total investment then this would already be at the outer margin of what the project could pay for before invoking Government guarantees.

This could lead to the bizarre position of Japan and or the USA paying for a British power station. Given, it seems, that now the only way Hinkley C will be built is for the French Government to contribute to the costs of the power station, this just adds to the bizarreness rating of the British nuclear programme. But then, at least in the case of Hinkley C there are theoretical investors for the equity portion of the investments. These are EDF, for some crazed reason, given their general finances, and the Chinese, who are being given rights to build their own power plant in the UK as a 'reward'. In the case of the NuGen development, there are no plausible investors - no doubt Toshiba can put in a bit, but not much, partly because they couldn't afford to take that risk, and also because manufacturers usually don't pay for their own products.

Quite where the developers will find anybody mad enough to bet billions on the chance that a nuclear power plant will be built more-or-less within project cost parameters is the big question. No nuclear plant that is being constructed in recent times even approaches this notion. Then there is the question of how much the UK Treasury would be persuaded to offer - Hinkley's cost, in current prices is £100 per MWh for 35 years even with the Treasury;'s loan guarantee, and that resting on EDF taking the first risk of cost overruns.

It all sounds highly unlikely to me. The Nugen developers say their plant will be generating in 2025. I will bet them (or anybody else) £100 that it is not generating by then. I am just arranging to pick up £100 in a bet that Hinkley C's construction would not have started by the end of 2015. I'll happily bet the same sum for completion of the Moorside project.

About Me

Dr David Toke is Reader in Energy Politics in the Department of Politics and International Relations in the University of Aberdeen. You can see his profile at http://www.abdn.ac.uk/socsci/people/profiles/d.toke
He has been campaigning on energy issues for around 30 years, and in 1990 his book ‘Green Energy’ was an influential argument in the UK for a non-nuclear approach to dealing with global warming. He was a key player in the campaign to establish feed-in tariffs for small renewable projects in the UK, achieved in 2008. He has consistently argued that the UK's proposed nuclear power programme is not only uneconomic compared to renewable energy, but that it is undeliverable short of one or more governments signing what amounts to a 'blank cheque' to pay for the nuclear power plant. His latest book, published by Routledge is called 'Low Carbon Politics'. He has published many papers in leading political science journals on environmental, especially energy (and renewable energy) issues and he is also a frequent and well cited contributor to the journal 'Energy Policy' published by Elsevier. His twitter address is @DaveToke